Resources Top 4: This uranium stock is a money pit with zero upside. Why is it up 60pc in a week?

KNB has approval to drill Atlantis copper gold prospect for the first time
Toro Energy’s Lake Maitland uranium-vanadium project extension study “significantly advanced”
RIO’s uranium arm ERA on 2 straight days of gains as minority shareholders hold out hope for development pivot

Here are the biggest resources winners in early trade, Tuesday January 16.

KOONENBERRY GOLD (ASX:KNB)

KNB has approval to drill the Atlantis copper gold prospect, an extensive 6.5km long anomaly underneath a scattering of high grade (+15%) copper rock chips in NSW.

The $9m capped junior reckons Atlantis has a similar vibe to the +5Moz Stawell gold mine in Western Victoria.

The maiden 6,000m aircore drill program will kick off following the summer months, it says.

“The Atlantis outcropping copper-gold mineralisation, copper-gold soil anomaly, geophysical targets, structural and geological setting make Atlantis a compelling target,” says managing director Dan Power.

“Whilst this prospect has been known about for some years, Koonenberry gold has advanced it to drill ready status and will be the first ever exploration company to conduct drill testing.”

Atlantis is part of KNB’s massive namesake project in northwestern NSW. Drill results from another target, Bellagio, are due soon.

The tightly held stock is up 75% over the past month.


 

CHILWA MINERALS (ASX:CHW)

(Up on no news)

This mid-2023 IPO is currently drilling to grow the size of its flagship 61.6Mt Mposa mineral sands deposit in Malawi.

It’s in a good spot, right next door to Mkango Resources’ Songwe Hill rare earths project, which has a resource of 8.8Mt.

It is also ~60km from Lindian Resources’ (ASX:LIN) Kangunkunde, one of the world’s largest hard rock REE projects outside China.

An additional diamond rig will go to site February to test for deeper minerals sands or ionic REE deposits in the clays underlying the current resource.

TORO ENERGY (ASX:TOE)

Toro Energy (ASX:TOE) has made inroads into its Lake Maitland uranium-vanadium project extension study, which is now ”significantly advanced”.

A scoping study on the highly profitable, 1.3Mlb per annum mine in WA envisaged NPV and IRR of $610m and 41% respectively, based on low all in sustaining costs of US$28/lb and a long term uranium price of US$70/lb.

Spot prices are currently pushing toward US$100/lb.

TOE sees potential to increase production by revising the cut-off grade and including material from nearby deposits Centipede-Millipede and Lake Way, part of the wider Wiluna project.

“The uranium resources at Lake Way and Centipede-Millipede are strategically located and considerable, and need to be thoroughly evaluated for viability,” says exec chair Richard Homsany.

“The inclusion of additional material into the Lake Maitland uranium vanadium processing operation has the strong potential to add significant value to the Wiluna uranium project.

“One of our key aims is to strengthen the production schedule at Lake Maitland and to assess the potential to extend the potential processing of high-grade uranium resource well beyond the 7th year of production, as is presently the case for a Lake Maitland only operation.”

TOE is one of the only WA players with state and federal environmental approvals, but the company says amendments are required.

The $60m capped stock is up 45% over the past month.

ENERGY RESOURCES OF AUSTRALIA (ASX:ERA)

A strange one. Rio Tinto’s (ASX:RIO) majority owned uranium play is in the environmental rehab phase at its Ranger mine in the NT.

It means they are not making money, just haemorrhaging cash on rehab costing an estimated $2.2bn.

So why the two straight days of gains? Maybe because minority shareholders are holding out hope that Traditional Owners change their tune and let ERA develop Jabiluka, an orebody RIO has promised will never be touched.

RIO, with the support of the Federal Government, has pledged to restore the shuttered NT mine to a similar state as the surrounding Kakadu National Park.

Other investors, including Perth investment identity Willy Packer, whose firm Packer and Co. holds the largest minority stake in ERA at 7.9%, are hoping Traditional Owners and RIO change their view.

“Since we bought into Energy Resources of Australia, the gross value of its uranium in the ground has increased from $10 billion to $40 billion, dwarfing the ever-increasing cost of rehabilitating its old Ranger mine,” Willy says in a December newsletter.

So, why doesn’t RIO buy out these minorities and delist ERA?

“It’s very simple,” RIO CEO Jakob Stausholm said May last year.

“This is a company that only has cash outflow. There is no cash inflow.

“That means it is impossible for me … to spend shareholders’ money to pay out shares that are worth nothing.”

Interesting response from the Rio Tinto CEO to my question about his failure to take out the ERA minorities to simplify the $2 billion Ranger uranium mine remediation plan inside Kakadu National Park. Meeting just finished after only 98 minutes. pic.twitter.com/8phgudQJFw

— Stephen Mayne (@MayneReport) May 4, 2023

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